Investors should not get too excited by Redx Pharma’s (REDX:AIM) latest update. Shares in the drug developer surged almost 13.5% higher to 36.9p before falling back to 35.2p after management said one of its candidates showed signs of fighting cancer.

Pre-clinical tests highlight that Redx’s Porcupine inhibitor could help improve the immune system’s response in some cancer patients. This was the result when the treatment was used in combination with Anti-PD-1 therapies, which activate the immune system to recognise and attack tumours.

Data shows that when the Porcupine inhibitor is used with an anti-PD-1 antibody it improves the ratio of tumour-attacking T-cells.

Web - Redx - 19 September 2016

As promising as this update is, investors have to remember that the treatment has yet to even begin human trials and that data generated in a lab cannot be used by a regulator to assess whether or not it can be sold to the public.

Redx has several years of clinical trials ahead of it to prove that the Porcupine inhibitor is safe and that it works. The first such tests on people start in 2017. It will be tested as a standalone therapy and as a combination treatment.

The investors also have to factor into any investment decision they make about the company is that drugs targeting oncology (tumours) have on average a 5.1% probability of reaching the market after entering phase I trials. This compares to 9.6% overall.

This is a good start for Redx, but there are many trials to go before the Porcupine inhibitor is proved to work. Investors backing the company at this stage are still taking a huge risk.

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Issue Date: 19 Sep 2016